Why customer data platforms need to evolve to meet new industry demands

Customer data platforms (CDPs) as a category have experienced a long-standing identity crisis — and it’s holding many organizations back from activating the full potential of their customer data.

Part of the problem is there is little consensus on what a CDP is or its primary function. Often, CDP providers market themselves solely as a way to create a customer 360 view, which significantly undersells what CDPs should do. CDPs can solve many organizational challenges and power highly personalized customer experiences, but only if they move closer to the business cases they solve.

Recent studies examine the disconnect and echo many of the challenges I commonly see organizations face. Let’s dive into the data to understand the current state of CDPs, and where the industry needs to head to provide more business value. 

Customer data platform trends and research

Customer data platforms are widely used across organizations of all sizes. Salesforce’s 9th State of Marketing found that 72% of marketers worldwide use CDPs alongside other tools. And teams are ready to invest more in their CDPs: Nearly 80% of respondents to IDC’s July 2024 Future of Customer Experience Survey said they plan to spend more on their CDP over the next year.

This adoption and investment indicates a perceived value of CDPs, however, research also suggests that organizations often do not know how to use CDPs to their fullest potential and drive value across teams. 

A 2024 Gartner® report on CDPs1 reinforced the confusion around CDPs, showing that the conversation around these platforms needs to evolve to help organizations get the most out of their tech investments and stay ahead of industry shifts:

• “While CDPs’ capabilities are extensive, business users aren’t maximizing the use of them. Only 17% of marketers surveyed report “high utilization” of their CDP.2 When asked about the key technologies supporting journey orchestration, few business users put a CDP high on their list, despite how essential it is to the operation. Instead, marketers are consuming these capabilities in other solutions, such as their account-based marketing platforms, marketing automation platforms and multichannel marketing hubs. ”

• “By 2026, 80% of organizations pursuing a 360-degree view of the customer will abandon it because it doesn’t adhere to data privacy regulations, relies on obsolete data collection methods and obliterates customer trust.”

• “Interest from data management roles, IT, and other customer-facing stakeholders is on the rise. A majority of vendors evaluated in the Magic Quadrant for Customer Data Platforms noted that the constituency of the buying group for CDPs was more than 50% IT (e.g., including roles reporting into the CIO, CTO, and CDAO). Indeed, more than‍three-fourths (78%) of organizations report centralizing customer data and systems under IT, reducing marketing’s autonomy to strategize, fund, select, deploy, and leverage specialized, marketer-centric technologies. These cross-functional buying groups arise as IT increasingly works to support multiple C-suite roles.”

What does this data suggest? At a high level: CDPs are underused. Privacy concerns are destroying faith in the ability to achieve customer 360 while preserving customer trust (although these fears are misplaced, as I explain below). And CDPs need to appeal to tech leaders across the organization to justify their worth. 

Now, let’s examine what CDPs can do and how they need to adapt.

The basic capabilities of customer data platforms

CDPs are underused, in part, because teams often primarily use them to unify customer data. 

At a minimum, CDPs must provide three features for creating and activating a single customer view:

• Data collection

• Profile unification

• Cross-channel activation

These are non-negotiables and largely where CDP providers start and stop their conversation. But a CDP’s potential is so much more than this. 

Customer data platform features overlap with several marketing technologies, including marketing automation platforms, multichannel marketing hubs, tag management systems, enterprise data warehouses, and more. The best CDPs can either replace those technologies entirely or greatly augment their power.

For marketers specifically, CDPs can boost the team’s speed and accuracy in activating the marketing loop, summarized by these four steps: 

1. Define who you will speak with with (your audience).

2. Decide what you will talk to them about (your offer).

3. Pick the channel to reach them on. 

4. Evaluate the outcome. 

Dozens of tools support these steps, and it’s easy for marketers to get lost in their options and pay for duplicative solutions or features that ultimately don’t enable what they need. Teams aren’t using customer data platforms as much as they can — because they need to think of CDPs as more than a path to customer 360.

Composable CDPs are a customer experience engine

To truly unlock the value of CDPs they need to be used as a central system not just for data, but for orchestrating marketing touchpoints. CDPs are uniquely positioned to deliver an experience in any customer communication channel to achieve a specific business outcome, like reducing churn, increasing sign-up rates, or boosting lifetime value for a specific product category. 

But to successfully accomplish these business outcomes, teams need to orchestrate all the current marketing software and create a seamless customer flow. The only way to do that is with a composable solution. 

Composable CDPs sit on top of any existing data cloud to preserve the customer 360 and activate real-time data across channel tools, acting as a customer experience engine. This means the CDP becomes the hub for all customer-facing activities: 

• Customer segmentation to create intelligent customer groups

• Orchestrating the messages to customers from existing channel tools.

• Data model management for flexibility with AI

• Privacy and compliance features to protect customer data

• Analytics that clearly tie individual activities to actual business results

A CDP is the experience engine that understands where every customer is in their journey and which channel(s) matter most for them in that moment. The CDP should provide recommendations that help marketers deliver an experience that drives any intended goal. CDPs are especially powerful for use cases including:

• Optimizing marketing spend by removing duplicate customer entries and approaching only the right customers for specific outreach.

• Using customer purchase and browsing history to deliver personalized offers that are more likely to drive the desired action.

• Orchestrating cohesive campaigns that follow customers across channels and measure how each channel performs.

Overcoming privacy concerns with CDPs

Expanding the CDP’s use is one thing. As research shows, however, marketers think it’s best to ditch customer 360 altogether to avoid trust and privacy concerns — but this doesn’t need to happen. 

Privacy concerns and shifting regulations have forced marketers to rethink how they collect and manage customer data. This process is especially complicated when designing journeys for global audiences that span dozens of channels. 

First-party data is essential for informing campaigns now that third-party cookies are increasingly unavailable. Marketers need a first-party data strategy to collect data in ethical ways that can build trust with customers. And they need to do everything they can to protect that data.

The truth is that traditional CDPs haven’t been the most privacy-conscious solution. They ask marketers to connect their data sources to a single location and have faith that the data will stay safe.

Composable CDPs address this concern by connecting to the data cloud, which should be the fortress for all customer data. Data clouds like Snowflake, Databricks, and Google Cloud BigQuery provide robust security measures and features that CDPs shouldn’t need to match.

CDPs extend this security by providing a window of the data for a specific activation. You don’t need to export your full customer 360 into a downstream platform and host it there. CDPs can pull from the warehouse as needed and deliver only the data that is absolutely necessary for organizational teams to access: 

• Individual country marketers receive customer data relevant to their region.

• Channel marketers access filtered data on audiences to activate a campaign.

• No individual can access personally identifiable information without explicit permission. 

Achieving the 100x potential of AI (with humans always in the loop)

Storing and constantly updating all customer data in one secure location is essential for the future of marketing and customer experience. This centralized data also sets the stage for optimal artificial intelligence implementation — as we like to say at GrowthLoop, “you don't have an AI strategy if you don't have a data strategy.”

The organizations that use AI to 100x their output and results are those that apply AI at the right point of their marketing and tech stack. If you apply AI at the wrong place and train it on siloed channel tool data, you’ll get an incremental boost (which won’t keep you competitive for long). 

Composable CDPs apply AI to the widest possible dataset (a single source of truth in the data cloud), so it continuously learns from every channel activity. Integrating business analytics, customer data, and the success of specific campaigns expands the traditional closed-loop marketing mindset to a unified loop that fuels ongoing learning and improvement. 

With all customer data in one location, teams can activate AI to achieve specific business goals and identify opportunities for campaign enhancement. Once AI understands what marketers are trying to accomplish (for example, churn prevention), it can quickly analyze what customers are currently doing and provide recommendations about what intervention could be most effective — showing which customers will be most likely to take action based on which message on which channel. It’s the guiding philosophy for GrowthLoop’s The Loop, the first platform that reports the actual business impact of marketing. 

Of course, marketers should never entirely give the reins over to AI. Marketers act as governors of AI, review its output, and make informed decisions based on their data. Together, marketers and AI can go from creating one journey for a specific goal to creating hundreds of journeys simultaneously in minutes, something they could never do alone. 

Giving IT teams control

As research shows, the buying committee for martech extends well beyond marketing. 

IT teams at sophisticated enterprise organizations do many things themselves because they know their data best: 

• They often ingest various lines of customer data and provide analytics on that data to business stakeholders, finance teams, and sales and marketing.

• They like to experiment with traditional ML and AI models to project business growth and find opportunities to maximize the value of every customer.

• They create systems to help consolidate customer data and identify duplicate entries to improve the team’s data management. 

Composable solutions connect directly to the data layer and empower IT teams to build what they want. They can leverage pre-built modules as desired and use whatever homebuilt solutions they’d like, whether that’s machine learning, AI agents, or identity resolution. 

Further, composable CDPs extend across tools for sales and customer success, making the most of every technology investment and integrating insights to report on the business impact of each activity. 

Creating data-driven customer experiences

If you've believed in the power of orchestrating a consistent and personalized customer experience across channels, it's now possible. Composable CDPs have fundamentally changed how we can deliver customer experiences at a scale that was never possible before, allowing you to use AI as a partner that accelerates innovation.

And while customers are increasingly wary about how their data is collected, used, and secured, composable CDPs present inherent security advantages. They access data stored securely in the cloud warehouse and limit the data that any channel tool accesses.  

Based on research, there’s an opportunity for organizations to rethink their approach to customer data platforms. Setting the right foundation with a composable solution centered around the data cloud can allow you to personalize your customer journey, protect your data, and use AI to its greatest potential. 

If you’re ready to adopt a customer data platform or upgrade your system, check out our CDP RFP checklist to ensure your chosen solution will deliver the results you need.

1 Source: Gartner, A Guide to What Is — and Isn’t — a Customer Data Platform, Lizzy Foo Kune and Benjamin Bloom, 16 May 2024. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.